The macroeconomic outlook continues to deteriorate as unemployment rises. Angry citizens are protesting austerity in the streets.

At the same time, Spain has just unveiled its 2013 austerity budget, but the overly-optimistic macroeconomic assumptions underlying the plan foreshadow missed deficit targets in the coming quarters, which will likely force a new round of austerity measures, further worsening the economic contraction.

Meanwhile, the Spanish region of Catalonia is threatening to secede.

Technically, the “worst-case scenario” for Spain would be something along the lines of a 100 percent decline in GDP and 100 percent unemployment. No one is calling for that.

Presented here are all of the things that could go wrong, though. The recent work of Citi economists and strategists is heavily cited because they seem to be consistently more bearish on the Spanish situation than other shops
…

The Spanish Financial System Completely Collapses

…By itself, Spain is the 12th largest economy in the world, and right now it is a complete and total mess with no hope of recovery in sight.

The national government is broke, the regional governments are broke, the banking system is insolvent and Spain is in the midst of the worst housing crash that it has ever seen.

On top of everything else, the unemployment rate in Spain is now over 25 percent and the unemployment rate for those under the age of 25 is now well above 50 percent.

An astounding 9.86 percent of all loans that Spanish banks are holding are considered to be bad loans which will probably never be collected.Before it is all said and done, probably ever major Spanish bank will need to be bailed out at least once.

Manufacturing activity in Spain has contracted for 17 months in a row, and the number of corporate bankruptcies in Spain is rising at a stunning rate.

Five different Spanish regions have formally requested bailouts from the national government, and the national government is drowning in an ocean of red ink.

Meanwhile, panic has set in and there has been a run on the banks in Spain. The following is from a recentBloomberg article….

Banco Santander SA (SAN), Spain’s largest bank, lost 6.3 percent of its domestic deposits in July, according to data published by the nation’s banking association. Savings at Banco Popular Espanol SA, the sixth-biggest, fell 9.5 percent the same month.

Eurobank Ergasias SA, Greece’s second-largest lender, lost 22 percent of its customer deposits in the 12 months ended March 31, according to the latest data available from the firm. Alpha Bank SA (ALPHA), the country’s third-biggest, lost 26 percent of client savings during that period.

Overall, the equivalent of 7 percent of GDP was withdrawn from the Spanish banking system in the month of July alone.

Thousands of Spaniards have become so desperate that they have resorted to digging around in supermarket trash bins for food. In response, locks are being put on supermarket trash bins in some areas.
…

"What we have to fight for is the freedom and independence of the fatherland, so that our people may be enabled to fulfill the mission assigned to it by the [C]reator."-Adolf Hitler

"None are more hopelessly enslaved than those who falsely believe they are free."-Goethe

"Homosexuality is not a civil right. Its rise almost always is accompanied, as in the Weimar Republic, with a decay of society and a collapse of its basic cinder block, the family."-Patrick Buchanan

"All that is necessary for evil to triumph is for good men to do nothing.-Edmund Burke

"We must use terror, assassination, intimidation, land confiscation, and the cutting of all social services to rid Galilee of its Arab population."
-- David Ben-Gurion (Founding Father of the State of Israel and First Israeli Prime Minister), from Ben-Gurion, a Biography, by Michael Ben-Zohar (May 1948)